So, “I could no longer pay my bills” means funds were available but they needed to be moved from an investment account to a deposit account.

Some meltdown.

What happens if you’re not? Any advice for those of us who are literally living paycheck to paycheck? I tried putting money away – $5-10 per month, when I could afford it after paying the bills. That’s with my student loans deferred, by the way – without the deferment I would be homeless. I currently have $40 in my savings account from a year of saving, and it’s all coming out now to pay for food and an overdraft fee on my checking account.

I’m unemployed and have no active credit cards (I long ago froze them and started payment plans to get rid of the debt entirely). Any suggestions?

I really like asithi’s idea. How difficult it sometimes is to get going but she has a great jump start plan.

I’m like #19, ABQBrent. I put almost everything on the credit card if I can, little and big emergencies. Then I pay it off. I do keep a month in easy access savings and have places I could get more money if I needed it (stocks, checks from the credit card company, etc.).

It really is hard for me to pull money out of savings in an emergency, even when that’s what the money is for. In the past I’ve actually been tempted to carry a balance on a CC and try to aggressively pay it down (even though it’s a really quick way to accidentally start building CC debt back up)

Different strategies sometimes work. The danger, though, is that it’s easier to spend on a credit card than with cash, and an “emergency” can be on a sliding scale, depending on whether you’re taking it out of savings or putting it on a card.

“Even worse, you’re paying 20% interest or so on that credit card”

I’d say that person has some pretty bad credit. With a decent credit score, you can secure a line of credit for much less than that. Mine is currently 5%.

“almost everyone has $20 worth of fat in their weekly budget”

I assure you that there are an awful lot of people out there who certainly do not have $20/week of “fat”. They are living paycheck to paycheck. Anything they do happen to have extra is going into retirement savings, 401(k), etc. Not just lying around, burning a hole in their pocket, or being spent on lattes.

“Never put anything on that card that you don’t have the money in your checking or savings account to cover”.

That’s a debit card, not a credit card. Why use a credit card at all if you are pulling money to pay for it directly from your checking/savings account? That doesn’t make any sense to me.

My emergency fund is in place to cover 3 months worth of living expenses if I were to lose my job, a reality in this economy. I have a line item in my budget for car mainentance/repair that is accounted for monthly. Ditto for medical, to cover things like doctor co-pays, dentist, etc. But if something truly major happened that I didn’t have cash for, I would use my credit card rather than take money from my emergency fund. I can see that the minute I did, I would lose my job, and then where would I be? Sorry, but I’m going to have to disagree this time.

Not all emergency money is CASH; my frequent flyer miles are high enough for two round-trip tickets to anywhere in the US (but sadly, not Hawaii!). My life insurance policies also have cash value, and I have used that source to get the down payment for my house, BUT I paid it back ASAP. It was the cash value of those policies that allowed me to buy a house. If your funeral is pre-paid (another way to save money, as inflation WILL happen, and it will save your family from making difficult decisions–and possibly some fighting–when you can arrange it so they will only be in mourning), and you can’t pay off the money you borrowed from your WHOLE life insurance (not TERM), at least make ALL of the interest payments. The cash value in relation to the policy’s value is not very high, so it’s not a source for much money, but it IS important to, at a MINIMUM, make the interest payments, especially if you have a family that will really need the money. Funeral homes prey on grief, and if you leave a bunch of money to be used at will, the funeral home will know how to get every possible penny out of your loved ones when your time comes. I’m all for pre-paying for your funeral; many people are uncomfortable talking about this subject, but since I don’t know of anyone walking around who is immortal (aside from a few nasty little dogs), you might as well plan for what YOU want, and prevent a family feud. A visit to a lawyer who specializes in estates is worthwhile while you are on that topic, too.

I have a fixed income that has not gone up significantly in 15 years. I don’t know how anyone can live on SSDI ALONE, but (I know this is off-topic) I have a private disability policy that I paid for with post-taxed dollars. The odds are much more favorable that you will be disabled vs. dead during your working lifetime, so a disability policy is a MUST in my book (and it could keep you out of some MONSTER credit card debt). I NEVER thought I would need my policy at age 34, but I did, and I was awfully glad I had it.

Hint–if you can POSSIBLY join a credit union, DO IT! They are much more helpful than banks, they are cheaper, they get to know you personally, and they will go over your finances with you if you ask. I got my mortgage reduced from a fixed 6.25% to an APR of 3.1% simply because the person at the credit union knew me, knew how their APR rules worked, and what my house was costing me per month. Credit unions have a lot of great limits on how high an APR can go, how often they can raise the rate, and how much they can raise the rate, so it’s not like an APR loan from a standard bank. Ask your parents, your spouse, or your employer if you qualify for a credit union. My mother was a member of a major one once since my first year in college, but she didn’t tell me I could join until 14 years later–she just “forgot”. Be proactive and ASK!

I’m almost 50 now, and when I look at my ability to have “emergency money”, a lot of it came from good financial planning when I was in my mid-20′s. Whether it was pre-paying for my funeral, having some income that is not taxable, or getting a wake-up call from a natural disaster, I became DETERMINED to have some cash on hand (it also helps to learn how to bargain). Because of this planning, I was able to get gutter guards on my house (I paid with my VISA debit card after a transfer from my savings account, and didn’t pay until I was satisfied with the job), as I have NO business climbing up a ladder since I have no balance, a my neighbor who had the big ladder moved. I don’t want my downspouts to clog with leaves and ruin my roof, so I weighed the cost of buying a ladder, hiring someone to clean my gutters about four times a year, plus at least one hospital stay and post-accident care that would come out of my pocket (health insurance doesn’t cover everything, and I have no family or friends who could take three weeks off to help me) against the one-time cost of the the guards on my gutters (and I got the company to throw in pressure-washing my house and hooking up my rainwater barrel as part of the deal, and got a warranty for as long as the guards are on the house), and I think I did a smart investment. The cost of the guards alone would be equal to an ER visit, and I’m not including a day or two in the hospital If necessary. If nothing else, what I did will add value to my house when it comes time for it to be sold. I could only do this because I had been saving money for quite a while.

I shop at Aldi quite a bit (you can find some AMAZING deals there, like a pressure washer for $50 (I have saved so much money by not having a professional clean my house for me!). What I like best about them is their sign, which is something we should all live by: “Cash or debit cards ONLY–no credit cards”.

I am SO glad that I listened to a friend when I was right out of college who was a little bit older and little bit wiser than I was about money, and what I should be doing with mine. I learned how to tell the difference between “need” and “want”, and if all else fails, I have known people who actually put their credit cards in a block of ice, so by the time it thaws (you can’t microwave or boil it, as both will ruin the card), you’ll know the difference between “need” and “want”. I’m not a nun living in shack with bare walls–I just keep my eyes out for bargains (I got my Samsung 52″ HDTV when Circuit City went out of business–their bad luck was my good fortune), and I do things like closing off the bedrooms when I turn on the heat or (rarely) the A/C. I made sure my house had shade before I bought it, and I can endure a little sweat. My car is over 20 years old, but I try to carpool as often as possible, and I walk to stores when I can. Take the city buses as often as possible, if you have them. I had a long conversation with my neighbor who finally got a job after two years; he’s deeply in debt, but won’t vanpool because he wants to “be by himself”. I suggested an iPod to drown out any chattering, and he said he couldn’t do that because “the women in the van might be talking about me”. I’m just going to let him pay an extra $500/month just for gas and parking in the city (he hasn’t even figured the costs of new tires, oil changes, and other maintenance on his giant truck, but they must be worth it to him.) I spent a year abroad while in college, and I LOVED taking the trains and buses and walking a bit–the stress level was so much less! I actually HATED having to drive when I got back to the USA, and took the bus as often as I could. I’m far from perfect, I still have to finish paying off my balance on the one credit card that I used for some “want” items, but I am making good headway on it and paying much more than the minimum. I don’t think I will ever be able to get a six month “safety net”, but I think that I’m doing the best that *I* can.

to #13, Kerry: In some personal finance circles, things like new tires, car maintenance, and braces on the kids aren’t considered emergencies. Those are all plannable things. If you own a car, some say, you should set aside money in a separate account purely to pay for issues that arise with the car. Emergencies are things like “crap, I have to pay my insurance deductible because a wind storm blew a huge branch onto my car,” or “oh, no, kid to the ER because of a sports injury.” I save all my money in one savings account . . . but if I had problems with having enough emergency fund, I would probably do some break-out accounts to help out and encourage me to save more. For you, it might be worth it to take another look at cash flow versus expenses and figure out how to make the gap bigger so that you can be putting more into savings.

Lost, on the other hand…

Your debt recovery story is a mystery: amount owing, repayment schedule, source of funds, occupation, etc.

It’s not unlike Lost.

Regardless, I finally did it–and the sense of security it provides is immeasurable.

And of course, it is a cash emergency fund

However, we always seems to have more emergencies than we can save for, (June $1200 daughter’s oral surgery not covered by insurance, July $1400 car repair after $700 new tires the month before, etc.) So… although we cleared the credit cards with a refinance, and had an emergency fund, it is consistently slipping downward and I am truly worried about slipping back.