Becoming Debt Free in 2009

January 14, 2009

What is your emergency fund security level?

Filed under: Dave Ramsey,Debt,Journey to Debt Freedom — ambercouric @ 9:28 am

I know Dave Ramsey promotes the $500/$1000 baby emergency fund for those working to get out of debt.  I think that is a good start but is it still applicable in today’s economic times?

Also, each person has a different set of circumstances.  For us we have had some major medical issues over the years so we have 6 months emergency fund.    I have thought several times that I should just pay off the car with the emergency fund but there is something that twists in my stomach every time I think of it.

One thing I know for sure is that by the end of 2009 I will be debt free except for the mortgage.

Would you pay off all your debt and have a small emergency fund or would you rather have a large emergency fund and continue to pay off debt?  What is your EF security level?



  1. My wife and I made a decision awhile back to have a large emergency fund to cover 6 months worth of expenses in case we were both to lose our jobs. We made this decision because of medical issues we felt made it imperative to have this kind of cushion and we probably need a larger cushion. We have been able to eliminate all of our debt except for her student loans, my car loan and our mortgage. My car loan will be paid off this June. At that point we have decided to put most of our extra cash flow each month in a mutual fund account which will also serve as a larger emergency fund. We will not pay off the student loans early since they are at such a low interest rate. We will probably prepay the mortage a little each month but nothing drastic.

    Comment by Daniel — January 14, 2009 @ 10:59 am

  2. For me, I have about 2g in an efund that I don’t really consider an efund. That’s for if something really horrible happened. Like I lost my job or I needed sudden medical work. Maybe, I should call that a disaster fund. I am working on building and efund of about 5k. This would be for things like sudden big gifts I might need to buy. unexpected travel or minor car repairs.

    Comment by debtor — January 14, 2009 @ 11:31 am

  3. My husband and I decided together against having savings. We would rather repay debt. Since we are working on paying off a line of credit right now so if we have an “emergency” we can access it again. A vicious cycle if we let it get out of hand, but that’s the choice we’ve made and we are very strict about repaying it.

    Comment by MakingUpForPastMistakes — January 14, 2009 @ 12:01 pm

  4. Hi there-its a tough call. I have a £500 emergency fund, but I don’t have a car as a huge expense, plus we have the NHS for medical emergencies (basically free medical care, thankfully). I’ve got my debt repayment program for 2 of my debts, so as long as I acheive this and get these PIFs in December, I’ll be happy.

    Comment by sharon rose — January 14, 2009 @ 12:07 pm

  5. I think having a small emergency fund is important. I am in the process of getting out of debt, but I know it’s going to take me a full year to do so. I know for the next year there WILL be unexpected expenses, and I need to plan for them. If I don’t, I will be forced to use my credit cards, which in my opinion, is backwards.

    Also, for me, this isn’t just about getting out of debt. It’s a life change, and learning to live below my means. And relying on credit cards don’t have a place in my life! 🙂

    My EF goal right now is $500 – and once i’m out of debt, this will increase quite a bit.

    Comment by Frugal Dreamer — January 14, 2009 @ 12:19 pm

  6. Thank you for your comment, btw. I appreciate it that anyone takes the time to look and pay attention.

    I used to think it was fine to keep no cash on hand and just have big credit card lines available to tap in the event of emergency. But lately, credit card companies have been closing accounts and lowering credit lines that are not fully used, so I don’t think it’s safe to assume that, for example, a $3,000 line of credit will be there if/when you need to use it. Therefore, I don’t mind carrying some debt, provided that it is at low rates, while keeping some cash around. After all, the cash you have is actual, real money at your immediate disposal and when you hand money over to a credit card company, it is no longer yours and it is gone. Obviously I have too much of a problem with owing (due to specific circumstances I just haven’t and won’t, for some time, talk about on my blog) so I’m not saying it’s good to be overextended, but owing a little at a low rate is not a bad thing if it is the only way you can keep access to some of your cold, hard cash.

    Comment by 444 — January 14, 2009 @ 12:31 pm

  7. Every paycheck I put money in my savings and pay off debt. I put about 50% in each. That way I always have a little in savings in case I need it, but can feel good when I pay off debt. I don’t like the “do one or the other thing”. When I’m out of debt, my goal will to have $5000 in a emergency fund.

    Comment by Movingonup! — January 14, 2009 @ 1:27 pm

  8. I pay off debt and save. I’d love to just throw everything at my debt but, like you, am afraid to do that. I’d also like to have a bigger ef but, like you, want to pay off my debt. Can’t have both at the same time and am uncomfortable choosing one over the other so this is the year for paying off debt and having a smaller ef. Next year, more in savings. Hopefully I can maintain or increase (!) my income levels long enough to accomplish those goals.

    Comment by SimplyForties — January 14, 2009 @ 1:42 pm

  9. We also keep a cushion of about six months. Before Kids we didn’t keep such a big cushion, and we were comfortable with that since we were both working.

    Now that we have one income and twice as many people, the emergency fund is a priority.

    Comment by Money MInder — January 14, 2009 @ 1:53 pm

  10. I did both when I had a huge credit card balance, I felt more safe and secure with the e-fund. I also took pride in my savings, it was proof that spenders can change. I still have less than the recommended amount of 3-6 months of living expenses. In terms of cash, I have less than 2 months expenses saved. I’m working this year to double that amount.

    Comment by Miss M — January 14, 2009 @ 3:00 pm

  11. I have an E fund of $1500 right now and I’d like it to get closer to $3,000. I know the recommendation is to have about 3-6 months of living expenses saved, but with a cut in my hours at work, I’m lucky that I can save at all! I’ve dipped into my E-fund a couple times for true emergencies and also for some not so emergency emergencies. Like Miss M, I’m working on my savings goals.

    Comment by bouncing back betty — January 14, 2009 @ 3:41 pm

  12. We have put off our debt-prepayment plan and have been focusing on building up the savings account. I’m a SAHM of two and we want to get 6-8 months of expenses saved before we go back to focusing on the debt. DH is getting great reviews at work, but his “spidey-sense” is tingling and he thinks that his department might be sold to another company in the near future.

    Our debt right now is two mortgages on our home (which we are REALLY upside down in) and a small mortgage on our rental house. Fortunately, our renter covers the mortgage and all expenses related to that house, so we aren’t too concerned about it. We have almost 2 months saved right now, but hope to be at 6 months e-fund in a year and a half.

    Comment by Angie — January 14, 2009 @ 4:24 pm

  13. Like MakingUpForPastMistakes, I feel like I can rely on my bank’s personal line of credit as a backup, so I’m not planning on saving up months of living expenses.

    I am still saving up for a $1K EF (for real emergencies, not “I need to borrow this money”), and I decided to start saving mini-funds for all big ticket yearly expenses (like web hosting for some non-blog sites I have), my car tabs, car repairs, xmas gifts next year, etc. I just started these mini-funds, so by the end of the year, I’ll have them saved up and will be in a good place to replenish when I’ve spent some, with my monthly budget (for a 1/12th the yearly expense). Once these are full, I don’t have to worry about saving up for them, they’ll already be there. I’m looking at a 5-6 year process to get out of debt, so after this year the saving will be far less onerous. I’m also single, have no kids, have a fairly good job (don’t forsee it being in danger truth be told), so I don’t feel like I’m in danger of needing a lot of savings.

    I’ve only got 1 credit card (which I opted-out of when they raised rates), so it will be cancelled eventually. I just opened a Discover card for the 0% balance transfers. I guess I should seriously consider getting another real credit card (MC or Visa) before the Citibank expires, so that I can use it everywhere when needed.

    I can see me deciding to increase my ef at some point in the future, but I just started the debt payment journey and I’m really interested in paying off debt, not putting it off!

    Comment by debtmaven — January 15, 2009 @ 2:58 am

  14. I don’t have a credit card, just a $500 line of credit on my checking account for possible (and highly unlikely) overdrafts. I had a decent efund, but it got wiped by my car needing replacing two weeks after graduation. My efund was slowly built back to $500 just a month or two ago, and I was fine with the gradual rebuilding until December when things started looking a little shaky. Now I’ve put debt repayments off for a little bit to get my efund up to $2500, which combined with my month of income I always have extra, will allow me to live for 3-4 months. (I live on quite a lot less than I make right now.) Then I’ll go back to tackling debt. I may throw a bit in the efund from time to time just to keep it growing, but my main focus will definitely be paying off my car.

    Comment by Slinky — January 16, 2009 @ 7:36 pm

  15. I currently have ~$27,000 in cash. If need be, this will last me 12-15 months. If I move back home with my parents (I’m in my mid-20s), that will last me more than 2 years. This economy is scaring the heck out of me and I’m trying to get as much cash together as I can.

    Comment by wellheeled — January 19, 2009 @ 1:45 am

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